Saudi Arabia Warns Against Use of Cryptocurrencies
Saudi Arabia has warned against the use of cryptocurrencies in the country, declaring them illegal. Use of cryptocurrencies for fraud and unauthorized payments was given as the rationale.
UPDATE: This article has been updated to reflect that the statement was a warning against cryptocurrency use, and not necessarily a full ban.
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‘Illusion and Get-Rich Scheme’
A committee within Saudi Arabia’s central bank, the Saudi Arabian Monetary Authority (SAMA), announced in a statement on August 12th has warned the country’s residents against using Bitcoin and other cryptocurrencies, saying they “are illegal in the kingdom and no parties or individuals are licensed for such practices.”
In the statement, the Standing Committee for Awareness on Dealing in Unauthorized Securities Activities in the Foreign Exchange Market said:
The committee warns all citizens and residents about drifting after such illusion and get-rich scheme[s] due to the high regulatory, security and market risks involved, not to mention signing of fictitious contracts and the transfer of funds to unknown recipients/entities/parties.
SAMA regulates banks and other financial institutions in the country, as well as issuing and controlling the riyal, Saudi Arabia’s national currency. The committee which issued the warning was created by royal order to be a watchdog on foreign exchange (forex) trading in the country. This market has been identified by the government as a source of fraud and other unsavory dealings.
It’s unclear to what extent cryptocurrency use is now restricted in Saudi Arabia. The statement declares cryptocurrencies illegal, but SAMA may not have the legal authority to impose a full ban. Cryptocurrency exchange BitOasis says on their website that they still operate in Saudi Arabia, as well as the United Arab Emirates (UAE), Kuwait, Bahrain, and Oman.
The standing committee has representatives from the Ministry of Interior, Ministry of Culture and Information, Ministry of Commerce and Investment, the Saudi Arabian Monetary Agency, and is chaired by the Capital Market Authority.
Prominent Saudi Bitcoin Skeptic Imprisoned
Yesterday’s statement wasn’t the first time crypto has been criticized by those in Saudi Arabia. Billionaire investor Prince Alwaleed bin Talal hit out against Bitcoin in the fall of 2017, saying it would “implode” eventually. He told CNBC that:
It just doesn’t make sense. This thing is not regulated, it’s not under control, it’s not under the supervision of the Federal Reserve or any other central bank. I don’t believe in this whole thing at all. I think it’s going to implode.
However, Alwaleed bin Talal can hardly be considered the voice of the government, as he was arrested in early November by Saudi authorities and held for more than 80 days as part of a corruption investigation that ensnared dozens of prominent citizens of the country. It has been reported that Alwaleed bin Talal and others had to turn over portions of their fortunes in exchange for their release.
Saudi Government Has Previously Worked
with Ripple and ConsenSys
Despite the new warning, Saudi Arabia’s government has previously shown interest in cryptocurrencies and blockchain technology. SAMA signed a deal in February with Ripple for a pilot program to use the crypto startup’s technology as a payment system. The Saudi central bank has also looked at partnering with the central bank of the UAE to jointly create a digital currency that could be used for international transactions between the two countries.
Additionally, the Saudi Ministry of Communications and Information Technology worked with Ethereum venture studio ConsenSys in May to produce a three-day bootcamp event. The goal was to provide training to local developers in blockchain technology.
This apparent official sanctioning of some forms of blockchain technology seems a bit at odds with the new warning against cryptocurrencies. The key issue may be the ends to which Saudi citizens are putting crypto. It remains possible that the government is looking to crack down on Saudis who have been using crypto to move their wealth beyond the reach tax collectors or to make international transfers that would otherwise be prohibited.
What do you think about Saudi Arabia’s warning against cryptocurrencies? Share your thoughts in the comments below.
Images via Al-Masdar News, Wikipedia